Eurozone inflation rate surges above 3% alert level

EUROZONE inflation surged to 3 percent in August, according to official data released yesterday, as widespread shortages, rising energy costs and one-off effects sent consumer prices in Europe sharply higher.

The rise takes the rate a full percentage point higher than the ECB’s target of 2 percent and to a level last reached in November 2011, although economists insist the hike is linked to effects of the coronavirus pandemic and will be shortlived.

The August inflation was mainly pushed higher by a 15.4 percent rise in energy prices, compared to a 14.3 percent rise a month earlier.

Jack Allen-Reynolds, senior economist at Capital Economics, said inflation in the 19-member eurozone could rise “even further in the coming months.”

“But this is due to temporary forces that should fade next year, leaving headline and core inflation well below 2 percent by the end of 2022,” he said.

The European Central Bank has for now set aside any concerns over the rise in consumer prices and says it will continue its long-running stimulus policies to help stoke recovery.

Before the summer break, ECB chief Christine Lagarde said the ECB would show “patience” in helping the 19-nation currency club through the health crisis, signalling key interest rates would stay lower.

Despite months of above target inflation data, the ECB has yet to make any tweaks to its 1.85-trillion-euro (US$2.2 trillion) pandemic emergency bondpurchasing program, its main tool.

The ECB’s ultra-loose monetary policy is aimed at keeping credit cheap in the eurozone to encourage spending and investment.